By Denis Bright
This week’s State of the States Report from the CommSec Division of the Commonwealth Bank was well publicized in the mainstream media. The full State of the States Report is readily available online. Judge the full report for yourself and evaluate its contribution to a better understanding of Australia in a volatile global economy.
The ripples of this volatility extend to constant fluctuations in the value of superannuation assets. Wall Street trends today are often Australian trends in the next couple of days on superannuation web sites. None of these global dynamics make it into the State of the States Report. Yet the graphics in the State of the States Report were highly newsworthy.
There are connotations of State of Origin matches. Good economic ratings for the NSW economy were of course stoked up by unaffordable housing prices. As US interest rates rise relative to Australia, the current State of the States performances are not likely to be too enduring particularly on the Sydney property market.
Business Insider Online (5 April 2018) does suggest that the time for a correction in the housing market is overdue. Six minor corrections in the housing market have been noted since 1970:
Overcoming this financial parochialism in financial markets was one reason for the formation of the Commonwealth Bank in 1912. As the former Reserve Bank of Australia, the Commonwealth Bank went on to finance the Trans Australian Railway. It helped to maintain the stability of John Curtin’s wartime economy against the challenges of demand and supply pressures.
But is the current banking system up to speed in handling the volatility ahead as President Trump charts a Far-Right America First Agenda?
The federal LNP is always steadfast in its commitment to Market Ideology for troubled times. Commitment to short-term gain is a hall-mark of the current banking system and is closely in sync with current federal LNP priorities and to current global financial markets.
Wall Street gyrations are influenced by computerized buying and selling systems so that falls are offset by a robotized rush for bargains. Fortunes can be made on falling markets until the overall trend-line becomes apparent for the days trading. This is happening as I type. As Noon approaches on Wall Street on Thursday 3 May, the market is down by 1.5 per cent. This could easily be reversed in the next four hours of trading as the falls plateau out. If the plateau fractures, it might be a bad afternoon on Wall Street (Yahoo Trading 02.00 EAT, Australia):
The Regression to a Market Oriented Banking System in Australia
Greg Jericho in the Guardian Online (5 April 2018) explained that such market gyrations are being compounded by institutional failures in Australia’s banking sector. Banking institutions are particularly tough in withholding interest rate relief to loans for owner-occupied dwellings:
In its final report into governance, accountability and culture at the CBA, APRA said the bank’s “continued financial success dulled the senses of the institution”.
The report found the CBA had a “widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experience and mistakes.”
APRA also pointed to an “overly-collegial and collaborative working environment” which lessened the opportunity for constructive criticism.
While emphasising the soundness of CBA’s financial position, Mr Morrison said the APRA report was a damning rap sheet and called it “required reading” for every financial institution in Australia.
“It found there was a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight, a lack of accountability and ownership of key risks by senior executives, a remuneration framework that had no bite and they were reactive, slow and had under-resourced systems and processes internally,” he told reporters.
In this new era of institutional repentance, the federal LNP must be commended for its blunt assessment of our national economic priorities.
The federal LNP Government should be keen to iron out these national inequalities in economic performance as revealed in the State of the States Report. Many variations in state and territory indicators relate to differing levels of dependence on food export and resources prices and have little to do with the political leadership skills of state and territory governments.
In Queensland, LNP Opposition Leader Deb Frecklington offered a State of Origin Assessment of the State of the States Report:
Queensland state LNP leader Deb Frecklington said the State of the States Report was damning for the Queensland government.
“Labor can spin this as much as they like but Queensland is in sixth position, that says everything,” she said.
“We should be fighting with NSW and Victoria for top spot, not languishing down the bottom with the likes of the Northern Territory.”
Although tourism is one of Queensland’s major industries, the state LNP stays with the Unlock the Land Traditions of the Old National Party. It opposes Vegetation Management Laws which assist in essential catchment management (Opposition Leader’s Media Release 2 May 2018):
“The laws we are fighting against will lock up nearly a million hectares of agricultural land from routine practices of vegetation management that keep land in production.
“They will shut down the ability to open up any new agricultural land, killing off thousands of potential jobs and denying billions of dollars in export income for our state.
“These laws reduce farmers to criminals on their own land by reactivating and giving more power to Labor’s dreaded tree police. These laws tie up rural producers in reams of red tape including costly bureaucratic development application processes that see these landholders charged thousands of dollars just to manage their own thickened vegetation—and all at a time when Queensland desperately needs to grow this important agricultural sector,” Deb said.
“I would really like to applaud all the primary producers right across Queensland and here in the Nanango Electorate who put so much time into fighting these changes. From the producers who travelled to Brisbane for the rally, to those who held virtual rallies and took to social media to spread the word.”
In far-off New York, Federal Minister Steven Ciobo was also frank in his G’Day USA Economic Outlook Address as Minister for Trade, Tourism and Investment (Media Release 30 April 2018):
We stand for rules that encourage growth and point the way to sound international cooperation. Rules that reinforce market principles, with sovereign nations playing their important, clearly demarcated role.
Today, I will seek to outline how 200 years of economic relations between Australia and the United States have culminated in today’s economic partnership – one that is making a real contribution to our region’s peace and prosperity. As a result, we are well positioned to shape the international rules for sustained growth for our two economies and our region.
Australia, as proudly stated by Minister Ciobo, had become one of the stalwarts of old time capitalism. What’s happening in New York trading apparently has some positive outcomes for the people of PNG, Vanuatu or the Solomon Islands, Minister Ciobo appears to be saying.
The evidence from the Banking Royal Commission on the economic and social costs of market ideology seems to come from another planet. After each Royal Commission hearing, the shortcomings of the banking system become more outrageous:
Not even death stopped some Commonwealth Bank customers being hit with fees for financial advice they did not receive, the banking royal commission has heard.
The commission has been told advisers at a CBA financial planning business continued to charge fees to customers they knew had died, including one instance where fees were charged for more than a decade.
Counsel assisting the inquiry, Michael Hodge QC, outlined several instances of advisers working for CBA subsidiary Count Financial billing customers for ongoing service after their deaths.
The latest revelations involve the loss of the 20 million personal bank statements through irresponsible outsourcing of data (ABC News Online 3 May 2018).
Solutions Compatible with Contemporary Globalization
Critical comments on Australia’s market ideology must be focused on achievable remedial solutions. Mainstream US financial institutions offer some of the most responsible criticisms of market ideology as espoused by Minister Ciobo.
The US McKinsey Global Institute has also severely challenged the Thatcherite economics which is preached by LNP leaders at international forums like the G’Day USA Economic Outlook Forum.
The exciting evidence from the McKinsey Global Institute comes free of charge in this working paper: The New Dynamics of Financial Globalization-August 2017.
Global capital flows have simply not recovered to their pre-GFC levels. The LNP ideal of welcoming more corporate influence in public policy is already a dated version of Thatcherism. This is inappropriate for Australia as a resource-rich economy which is around 20th in global ranking in purchasing power parity terms (PPP). Cutting company tax, containing government spending and deregulating the labour market is no real solution to current underemployment levels.
The Challenge of Reduced Post-GFC Capital Flows
A sustainable financial future for Australia requires a commitment to a stronger and more internationalized business sector. Some responsible risk-taking must be made by both commercial investment banks and public institutions.
In a world of global financial volatility with negative ripple effects on the superannuation assets of most Australian families, there is a strong case for publicly owned Investment Funds that tap global capital flows for investment in national and state projects. These Investment Funds at national and state levels would earn income for corporate investors from market delivery projects as varied as providing affordable housing, expanding transport infrastructure or sustainable health programmes.
Stephen Smyth of the CFMEU in Brisbane presented the case for an Energy Transition Authority to assist with the transition to a cleaner energy future that offers affordable and reliable electricity as well as fair working conditions for union members and their families. The Forum was organized by Environmental Labor (LEAN).
Federal Labor could use the benefits of global financialisation to revitalise sustainable transport, housing, tourism, disability services and sustainable health for all ages. Policy input is invited to the new National Policy Draft by 18 May 2018.
The federal LNP no longer pokes fun at Bill Shorten’s commitment to a Royal Commission into Australian Banking as promised at the 2016 federal election.
If Bill Shorten makes it to the Lodge next time, his case for change was clearly from Opposition in 2016 with commitments to defend Medicare and the now current Royal Commission into Australian Banks.
More such political risks must be taken to reawaken the electorate from its current slumbers generated by repetitive news bulletins and recurrent nightmares brought on by President Trump’s latest militaristic ventures on behalf of global military industrial complexes.
Denis Bright (pictured) is a registered teacher and a member of the Media, Entertainment and Arts Alliance (MEAA). Denis has recent postgraduate qualifications in journalism, public policy and international relations. He is interested in advancing pragmatic public policies compatible with contemporary globalization. Denis will be absent on a short overseas trip to China and Hong Kong in late May.
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